(Bloomberg) -- Asian semiconductor-related stocks tumbled, putting regional benchmarks on course for their worst drop in a month amid renewed concerns of overheating in the artificial intelligence rally.
The MSCI Asia Pacific Index fell as much as 2.7%, the most since the panic selloff on Aug. 5. Taiwan’s Taiex tumbled 4.5% while Japan’s Topix slid 3.7% and Korea’s Kospi dropped 3.2%. The declines came after leading global AI chipmaker Nvidia Corp. shed a daily record of $278.9 billion in market value Tuesday.
The latest concerns were sparked by analyst comments that AI stocks had gotten too far ahead of what the technology can actually deliver in terms of profits. The risk-off mood was further stoked by worry over the US economy after a closely watched US manufacturing gauge missed estimates.
“Now investors are starting to question if the return on investment is coming through,” Randy Abrams, head of Taiwan research at UBS Global Asset Management, said in a Bloomberg TV interview. “They are a bit nervous as some of the macro data is not as strong.”
Despite rising volatility, most investors cautioned against taking Wednesday’s slide as the start of another market meltdown, recommending dip-buying of selected names, as AI spending is expected to remain strong.
“It feels a bit like a storm in a tea cup after August,” said Andrew Jackson, a strategist at Ortus Advisors Pte. “It feels like we are not getting a repeat of the intense panic selling like last time.”
Chip stocks were the biggest drags on MSCI’s broadest Asian equity gauge Wednesday. Among key Nvidia suppliers, foundry Taiwan Semiconductor Manufacturing Co. slid 5.4%. Japanese testing-equipment maker Advantest Corp. plunged 7.7%, while Korean memory maker SK Hynix Inc. tumbled 8%.
More broadly, investors are monitoring conflicting cues to kick off September, a historically volatile month for stocks. While China’s economic funk continues to weigh on sentiment, there are also expectations that the Federal Reserve will begin cutting interest rates in its upcoming meeting, providing a boost for equities.
Some also maintain optimism on the promise of AI, with companies around the world still planning to spend billions as they incorporate the new technology.
“The concern for a peak in demand for AI is exaggerated in our view,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global Pte. “We will likely see demand for AI and its supporting infrastructure remaining robust through the first half of next year.”
In addition, valuations are seen as somewhat less of an issue in Asia, where AI stocks have lagged the gains in some of the biggest global names. A Bloomberg gauge of Asian chipmakers is trading at about 13 times forward estimated earnings, down from over 18 times earlier this year and trailing the nearly 24 times level of an index of major US-listed peers.
Sectors to Watch
- Asian energy stocks fell as oil extended its slide on glut concerns and China braced for storm Yagi, which has already killed at least 15 people in the Philippines.
- Shares of China’s organic light emitting display producers rise after a Nikkei report said Apple plans to use OLED displays in all of its iPhone models sold from next year.
- Cochin Shipyard and Paras Defence lead gains in India’s defense-related stocks after the government’s Defence Acquisition Council approved 10 proposals worth 1.45 trillion rupees ($17.3 billion).
- China’s rapeseed oil production and processing firms climb following an anti-dumping probe into rapeseed imports from Canada.
- Asian semiconductor-related stocks tumbled, with benchmarks in tech-heavy Taiwan and South Korea on course for their worst drops in a month amid renewed concerns of overheating in the artificial intelligence rally.
- Shares of Australia’s iron ore miners, including Fortescue and Rio Tinto, track global peers lower after iron ore prices held below $95 a ton on Wednesday. Copper stocks also fell after Goldman Sachs exited a long-term bullish position on the commodity and slashed its 2025 price forecast by almost $5,000, citing shrinking demand in China.
Markets at a Glance
- MSCI Asia Pacific Index fell 2.4%
- Japan’s Topix Index fell 3.7%; Japan’s Nikkei Index fell 4.2%
- China’s CSI 300 Index fell 0.6%; Hong Kong’s Hang Seng Index fell 1.1%; Hong Kong’s Hang Seng China Enterprises Index fell 1.1%
- Taiwan’s Taiex Index fell 4.5%
- South Korea’s Kospi Index fell 3.1%; South Korea’s Kospi 200 Index fell 3.4%
- Australia’s S&P/ASX 200 Index fell 1.9%; New Zealand’s S&P/NZX 50 Gross Index rose 0.2%
- India’s NSE Nifty 50 Index fell 0.3%
- Singapore’s Straits Times Index fell 1.2%; Malaysia’s KLCI Index fell 0.4%; Philippines’s PSEi Index was little changed; Indonesia’s JCI Index rose 0.7%; Thailand’s SET Index rose 0.1%; Vietnam’s VN Index fell 0.6%
- 10-year Treasury yield fell 1.1 basis points
- Cboe Volatility Index rose 1.94 points
- Bloomberg Dollar Index fell 0.1%
- West Texas Intermediate crude fell 0.2% to $70 a barrel
- Euro rose 0.1%
Here Are the Most Notable Movers
- Woolworths fell after the retailer reported adjusted headline earnings per share that missed expectations, likely due to poor performance in its Country Road division, analysts note.
- Sanergy Group rebounded after regulator scrutiny and a margin-unwind on Tuesday nearly wiped out all of its market value. TSMC drops, leading declines in Asian semiconductor-related stock after a record value wipe-out in Nvidia Corp.
- Zoomlion Heavy Industry shares declined as Morgan Stanley lowers the price target and net profit estimates for the Chinese construction machinery maker, citing a weak and imbalanced domestic recovery.
- CapitaLand Integrated shares slide after the trust fixed the price for a private placement to fund a stake purchase in a luxury mall at a discount to the stock’s last traded level.
- Shares in Guolian Securities climbed after the state assets regulator of China’s Jiangsu province agreed in principle to the brokerage’s plan to buy 99.26% shares in Minsheng Securities.
- Fuji Soft Inc.’s stock surged to above the price offered in Bain Capital’s surprise ¥600 billion ($4.1 billion) buyout bid, signaling expectations for a rare Japan bidding war with KKR & Co.
Notes From the Sell-Side
- Risks related to corporate earnings and geopolitics are likely to constrain the outlook for European stocks, according to Citigroup strategists, who remain neutral on the region and overweight US equities.
- Investors should refrain from adding risk to their portfolios given the mixed economic backdrop and many unknowns ahead, according to Barclays strategists.
- Options appear expensive on companies including H&M and Siemens Energy, while contracts on Adyen and Vestas screen cheap. Below are the Stoxx 600 stocks with the largest premiums and discounts in one-month, at-the-money implied volatility vs. realized relative to the Euro Stoxx 50 as of Sept. 3.
- The unwinding of a large Cboe Volatility Index options trade shows the space gets “broken” when dealers become vulnerable to sharp moves in the gauge, according to Nomura Securities International’s Charlie McElligott.
- Macquarie expects global equity markets to be volatile in the second half of the year due to the US elections and prefers Malaysian and Singapore stocks in the Southeast Asian region.
- The unwinding of a large Cboe Volatility Index options trade shows the space gets “broken” when dealers become vulnerable to sharp moves in the gauge, according to Nomura Securities International’s Charlie McElligott.
Related Market News
- Taking Stock: The recent rally in the yen is shaking up Japan’s retail sector as domestic-focused players leverage the currency’s nascent strength to deliver fatter returns to investors.
- Inside Asia: Most Asian currencies traded higher against the dollar as Treasury yields slip. The Taiwan dollar underperformed peers as foreign funds dumped the largest amount of Taiwan shares on record.
- Global Wrap: A global retreat from risk assets continued on Wednesday after fears about the US economy and a move away from big tech triggered a sharp decline in US stocks.
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Abhishek Vishnoi, Annabelle Droulers and Ashutosh Joshi.
(Updates index levels. An earlier version of this story was corrected to say the date of the previous selloff was Aug. 5)
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